LONDON: Gold hit its highest in nearly three weeks in thin trade on Monday, shrugging off a stronger dollar on technical buying, while the world's biggest gold exchange-traded fund recorded the first inflow in two months.
Holdings in SPDR Gold Trust grew by 0.2 percent to 911.13 tonnes on Friday - the first increase since June 10. The fund has seen more than 14 million ounces in outflows this year, about $19 billion at current prices.
Spot gold rose as much as 2.2 percent to $1,343.06 an ounce, its highest since July 24. It was up 2 percent at $1,340.50 by 1407 GMT, on track for its fourth straight day of gains and its biggest daily increase in three weeks.
US gold futures for December gained $26.70 to $1,338.90 an ounce.
Traders reported buying of gold by those who had agreed to sell at future dates in expectation of lower prices, while automatic buy orders were placed at preset levels to increase profit.
"If you see shorts, then people are running for cover," VTB Capital analyst Andrey Kryuchenkov said.
"You break above a certain level when people have stop orders set at $1,300 and $1,320 but we may again see some resistance around $1,340," he added.
The dollar rose 0.4 percent against a basket of currencies, moving away from a seven-week low hit on Thursday.
A stronger dollar usually makes commodities denominated in the US unit more expensive for holders of other currencies, but both assets gained on Monday.
"It is interesting to see some strength at a time when we are also seeing a stronger dollar, which is a wake-up call to those looking for much lower prices that there is going to be a bit of a fight," Saxo Bank senior manager Ole Hansen said.
Gold received a boost from data on Friday showing US wholesale inventories fell unexpectedly for a second straight month in June, prompting economists to trim second-quarter growth estimates and raising speculation the Federal Reserve could continue its stimulus measures for longer.
Market participants were now awaiting a US retail sales reading on Tuesday to gauge the timing of the Fed's tapering.
Accommodative monetary policy in the United States favours gold because low interest rates encourage investors to put money into non-interest-bearing assets.
Elsewhere, hedge funds and money managers trimmed gold net longs and significantly reduced their short positioning to the lowest level since May, a report by the US Commodity Futures Trading Commission showed on Friday.
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